When Did Paying Staff Become So Complicated?!

Doing your own payroll is extremely complicated.  There are layers upon layers of law that apply, and the penalties can be crippling.

At a basic level, you have rules around employee payments and associated entitlements/taxes with Fair Work Ombudsman, the ATO, and state revenue offices. These aren’t just general rules – they’re very specific in terms of deadlines. Missing deadlines, along with shortfalls in payments, can lead to breach notices, investigations, huge fines, and penalties.

Here are some of the many requirements you must meet when doing payroll:

Pay Slips & Timing

• Pay slips must be issued within 1 working day of pay day and contain all legally required details.  
• Understand what pay periods you’re working with and how these work with other deadlines.

Tax and Reporting Obligations

• Lodge TFN declarations when your employee starts. 
• Single Touch Payroll (STP) reporting when you pay employees. 
• End of Year Finalisation (EOYF) declaration through STP. 
• Withhold PAYG Withholding and remit it to the ATO as part of your BAS (quarterly for most businesses, but the ATO might change it to monthly if you have a large payroll bill)

Superannuation Requirements

• Pay superannuation amounts at the current superannuation guarantee rate.  On 1 July 2025, this is 12% and can change in the future.
• From 1 July 2026, superannuation pay day means you’ll need to pay superannuation at the same time as wages instead of quarterly.
• If you’re late, you’ll have to pay the Superannuation Guarantee Charge (SGC) which includes interest and an administration fee.
• Important: Late superannuation isn’t deductible on your tax, and penalties are hefty

Payroll Tax

• Large payroll bills might trigger your requirement to remit payroll tax

Scenario #1: The Mixed-Up Timesheets

A small shop hires two receptionists working alternating shifts. They both fill in manual timesheets and email them to the business owner who manages payroll himself. Unfortunately, the business owner is super busy. He mixes up the timesheets and pays one receptionist more than the other, even though she didn’t work those hours, and issues the pay slips.

The other receptionist, who worked more but didn’t get paid accordingly, tells the business owner she was underpaid. The business owner, who’s really busy, does a quick transfer of a random $500 to “make up for it” thinking the problem is ‘solved’. But the receptionist isn’t happy – it’s not enough.

There are many problems with this scenario:

• Potential ATO audit – amounts reported with STP when doing the pay slips may not match transfers
• Wage theft risk – underpaying wages is a criminal offence
• Incorrect records – overpayment for one employee, underpayment for another
• Missing adjustments – STP corrections not made
• Superannuation and PAYG issues – random payment should have included proper calculations

Even though the business owner thinks everything is fine, these problems may make themselves known a few months down the track when the business owner may receive a letter. At that point, the problem involves the authorities and then involves more work looking at past records.

Scenario #2 – Superannuation Confusion

A small business employs 8 employees but missed one quarter of superannuation payments. They didn’t even know until their employee pointed it out. They identified which quarter they missed and lodged a payment. Unfortunately, they got confused and assumed they had paid for the current quarter, but had only caught up on the previous quarter that was overdue.

Another 6 months pass, and they’re late again! Their employee notified the ATO and now they’re being audited.

What a mess! Just from confusion with timelines and deadlines.

Let’s look at the key issues in this scenario:

• ATO audit triggered by employee complaint
• Late superannuation payments are not tax deductible 
• The Superannuation Guarantee Charge with specific calculations and deadlines should be lodged if superannuation payments are not paid by the deadline

You can see how easy it is for payroll to be messed up – calculations could be wrong, payments missed, multiple deadlines to meet. Frankly, it’s not something you want to mess up because of how serious the penalties are.

In many cases, it is cheaper to pay a professional than pay penalties. Get professional payroll services to help you stay in control and follow the rules to avoid costly penalties.